Z-0767.1  _______________________________________________

                         SENATE BILL 5296

          _______________________________________________

State of Washington      54th Legislature     1995 Regular Session

By Senators Quigley, Moyer and Winsley; by request of Department of Health

Read first time 01/18/95.  Referred to Committee on Health & Long‑Term Care.

Modifying health facility and services provisions.

    AN ACT Relating to health facilities and services; amending RCW 70.38.015, 70.38.025, 70.38.105, 70.38.115, 70.38.125, and 70.38.135; creating new sections; decodifying RCW 70.38.155, 70.38.156, 70.38.157, 70.38.914, 70.38.915, 70.38.916, 70.38.917, 70.38.918, and 70.38.919; repealing RCW 70.38.095, 70.38.105, 70.38.111, 70.38.115, 70.38.125, and 70.38.220; providing an effective date; and declaring an emergency.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

    Sec. 1.  RCW 70.38.015 and 1989 1st ex.s. c 9 s 601 are each amended to read as follows:

    It is declared to be the public policy of this state:

    (1) That health planning is essential to:  Promote((, maintain, and assure)) the health of all citizens in the state((, to)); recognize prevention as a high priority; and provide accessible, quality health services, health ((manpower)) personnel, health facilities, and other resources ((while controlling excessive increases in costs, and to recognize prevention as a high priority in health programs, is essential to the health, safety, and welfare of the people of the state)).  Health planning should be responsive to the changing needs of the health ((and social needs and conditions)) system.  Involvement in health planning from both consumers and providers throughout the state should be encouraged;

    (2) ((That the development of health services and resources, including the construction, modernization, and conversion of health facilities, should be accomplished in a planned, orderly fashion, consistent with identified priorities and without unnecessary duplication or fragmentation;

    (3))) That the development and maintenance of adequate health care information, statistics and projections of need for health facilities and services is essential to effective health planning and resources development;

    (((4))) (3) That the development of nonregulatory approaches to health care cost containment should be considered, including the strengthening of ((price competition)) market forces; and

    (((5))) (4) That health planning should be concerned with public health ((and health care financing)), access, and quality, recognizing their close interrelationship and emphasizing ((cost control)) cost-effectiveness of health services((, including cost-effectiveness and cost-benefit analysis)).

    Sec. 2.  RCW 70.38.025 and 1991 c 158 s 1 are each amended to read as follows:

    When used in this chapter, the terms defined in this section shall have the meanings indicated.

    (1) "Board of health" means the state board of health created pursuant to chapter 43.20 RCW.

    (2) Until July 1, 1997, "capital expenditure" is an expenditure, including a force account expenditure (i.e., an expenditure for a construction project undertaken by a nursing home facility as its own contractor) which, under generally accepted accounting principles, is not properly chargeable as an expense of operation or maintenance.  Where a person makes an acquisition under lease or comparable arrangement, or through donation, which would have required review if the acquisition had been made by purchase, such expenditure shall be deemed a capital expenditure.  Capital expenditures include donations of equipment or facilities to a nursing home facility which if acquired directly by such facility would be subject to certificate of need review under the provisions of this chapter and transfer of equipment or facilities for less than fair market value if a transfer of the equipment or facilities at fair market value would be subject to such review.  The cost of any studies, surveys, designs, plans, working drawings, specifications, and other activities essential to the acquisition, improvement, expansion, or replacement of any plant or equipment with respect to which such expenditure is made shall be included in determining the amount of the expenditure.  This subsection expires July 1, 1997.

    (3) Until July 1, 1997, "continuing care retirement community" means an entity which provides shelter and services under continuing care contracts with its members and which sponsors or includes a health care facility or a health service.  A "continuing care contract" means a contract to provide a person, for the duration of that person's life or for a term in excess of one year, shelter along with nursing, medical, health-related, or personal care services, which is conditioned upon the transfer of property, the payment of an entrance fee to the provider of such services, or the payment of periodic charges for the care and services involved.  A continuing care contract is not excluded from this definition because the contract is mutually terminable or because shelter and services are not provided at the same location.  This subsection expires July 1, 1997.

    (4) "Department" means the department of health.

    (5) Until July 1, 1997, "expenditure minimum" means, for the purposes of the certificate of need program, one million dollars adjusted by the department by rule to reflect changes in the United States department of commerce composite construction cost index; or a lesser amount required by federal law and established by the department by rule.  This subsection expires July 1, 1997.

    (6) Until July 1, 1996, "health care facility" means hospices, hospitals, psychiatric hospitals, nursing homes, kidney disease treatment centers, ((ambulatory surgical facilities,)) and home health agencies, and includes such facilities when owned and operated by a political subdivision or instrumentality of the state and such other facilities as required by federal law and implementing regulations, but does not include Christian Science sanatoriums operated, listed, or certified by the First Church of Christ Scientist, Boston, Massachusetts.  In addition, the term does not include any nonprofit hospital:  (a) Which is operated exclusively to provide health care services for children; (b) which does not charge fees for such services; and (c) if not contrary to federal law as necessary to the receipt of federal funds by the state.  On July 1, 1996, "health care facility" means nursing homes.  This subsection expires July 1, 1997.

    (7) Until July 1, 1997, "health maintenance organization" means a public or private organization, organized under the laws of the state, which:

    (a) Is a qualified health maintenance organization under Title XIII, section 1310(d) of the Public Health Services Act; or

    (b)(i) Provides or otherwise makes available to enrolled participants health care services, including at least the following basic health care services:  Usual physician services, hospitalization, laboratory, x-ray, emergency, and preventive services, and out-of-area coverage; (ii) is compensated (except for copayments) for the provision of the basic health care services listed in (b)(i) to enrolled participants by a payment which is paid on a periodic basis without regard to the date the health care services are provided and which is fixed without regard to the frequency, extent, or kind of health service actually provided; and (iii) provides physicians' services primarily (A) directly through physicians who are either employees or partners of such organization, or (B) through arrangements with individual physicians or one or more groups of physicians (organized on a group practice or individual practice basis).  This subsection expires July 1, 1997.

    (8) Until July 1, 1997, "health services" means clinically related (i.e., preventive, diagnostic, curative, rehabilitative, or palliative) services and includes alcoholism, drug abuse, and mental health services and as defined in federal law.  This subsection expires July 1, 1997.

    (9) "Health service area" means a geographic region appropriate for effective health planning which includes a broad range of health services.

    (10) "Person" means an individual, a trust or estate, a partnership, a corporation (including associations, joint stock companies, and insurance companies), the state, or a political subdivision or instrumentality of the state, including a municipal corporation or a hospital district.

    (11) "Provider" ((generally)) means a health care professional or an organization, institution, or other entity providing health care ((but the precise definition for this term shall be established by rule of the department, consistent with federal law)).

    (12) "Public health" means the level of well-being of the general population; those actions in a community necessary to preserve, protect, and promote the health of the people for which government is responsible; and the governmental system developed to guarantee the preservation of the health of the people.

    (13) "Secretary" means the secretary of health or the secretary's designee.

    (14) "Tertiary health service" means a specialized service that meets complicated medical needs of people and requires sufficient patient volume to optimize provider effectiveness, quality of service, and improved outcomes of care.

    (15) "Hospital" means any health care institution which is required to qualify for a license under RCW 70.41.020(2); or as a psychiatric hospital under chapter 71.12 RCW.

    Sec. 3.  RCW 70.38.105 and 1992 c 27 s 1 are each amended to read as follows:

    (1) The department is authorized and directed to implement the certificate of need program in this state pursuant to the provisions of this chapter.

    (2) There shall be a state certificate of need program which is administered consistent with the requirements of federal law as necessary to the receipt of federal funds by the state.

    (3) No person shall engage in any undertaking which is subject to certificate of need review under subsection (4) of this section without first having received from the department either a certificate of need or an exception granted in accordance with this chapter.

    (4) The following shall be subject to certificate of need review under this chapter:

    (a) The construction, development, or other establishment of a new health care facility;

    (b) ((The sale, purchase, or lease of part or all of any existing hospital as defined in RCW 70.38.025;

    (c))) Any capital expenditure for the construction, renovation, or alteration of a nursing home which substantially changes the services of the facility ((after January 1, 1981,)) provided that the substantial changes in services are specified by the department in rule;

    (((d))) (c) Any capital expenditure for the construction, renovation, or alteration of a nursing home which exceeds the expenditure minimum as defined by RCW 70.38.025.  However, a capital expenditure which is not subject to certificate of need review under (a), (b), (((c),)) or (((e))) (d) of this subsection and which is solely for any one or more of the following is not subject to certificate of need review except to the extent required by the federal government as a condition to receipt of federal assistance and does not substantially affect patient charges:

    (i) Communications and parking facilities;

    (ii) Mechanical, electrical, ventilation, heating, and air conditioning systems;

    (iii) Energy conservation systems;

    (iv) Repairs to, or the correction of, deficiencies in existing physical plant facilities which are necessary to maintain state licensure;

    (v) Acquisition of equipment, including data processing equipment, which is not or will not be used in the direct provision of health services;

    (vi) Construction which involves physical plant facilities, including administrative and support facilities, which are not or will not be used for the provision of health services;

    (vii) Acquisition of land; and

    (viii) Refinancing of existing debt;

    (((e))) (d) A change in bed capacity of a health care facility which increases the total number of licensed beds or redistributes beds ((among)) between acute care((,)) and nursing home care((, and boarding home care)) if the bed redistribution is to be effective for a period in excess of six months, or a change in bed capacity of a rural health care facility licensed under RCW 70.175.100 that increases the total number of nursing home beds or redistributes beds from acute care ((or boarding home care)) to nursing home care if the bed redistribution is to be effective for a period in excess of six months;

    (((f))) (e) Any new tertiary health services which are offered in or through a health care facility or rural health care facility licensed under RCW 70.175.100((, and which were not offered on a regular basis by, in, or through such health care facility or rural health care facility within the twelve‑month period prior to the time such services would be offered;

    (g) Any expenditure for the construction, renovation, or alteration of a nursing home or change in nursing home services in excess of the expenditure minimum made in preparation for any undertaking under subsection (4) of this section and any arrangement or commitment made for financing such undertaking. Expenditures of preparation shall include expenditures for architectural designs, plans, working drawings, and specifications.  The department may issue certificates of need permitting predevelopment expenditures, only, without authorizing any subsequent undertaking with respect to which such predevelopment expenditures are made)); and

    (((h))) (f) Until July 1, 1996, any increase in the number of dialysis stations in a kidney disease center.

    (5) The department is authorized to charge fees for the review of certificate of need applications and requests for exemptions from certificate of need review.  The fees shall be sufficient to cover the full cost of review and exemption, which may include the development of standards, criteria, and policies.

    (6) No person may divide a project in order to avoid review requirements under any of the thresholds specified in this section.

    Sec. 4.  RCW 70.38.115 and 1993 c 508 s 6 are each amended to read as follows:

    (1) Certificates of need shall be issued, denied, suspended, or revoked by the designee of the secretary in accord with the provisions of this chapter and rules of the department ((which establish review procedures and criteria for the certificate of need program)).

    (2) Criteria for the review of certificate of need applications, except as provided in subsection (3) of this section for health maintenance organizations, shall include but not be limited to consideration of the following:

    (a) The need that the population served or to be served by such services has for such services;

    (b) ((The availability of less costly or more effective alternative methods of providing such services;

    (c))) The financial feasibility ((and the probable impact of the proposal on the cost of and charges for providing health services in the community to be served)) as it relates to quality and access;

    (((d) In the case of health services to be provided, (i) the availability of alternative uses of project resources for the provision of other health services, (ii))) (c) The extent to which such proposed services will be accessible to all residents of the area to be served((, and (iii) the need for and the availability in the community of services and facilities for osteopathic and allopathic physicians and their patients.  The department shall consider the application in terms of its impact on existing and proposed institutional training programs for doctors of osteopathy and medicine at the student, internship, and residency training levels;

    (e) In the case of a construction project, the costs and methods of the proposed construction, including the cost and methods of energy provision, and the probable impact of the construction project reviewed (i) on the cost of providing health services by the person proposing such construction project and (ii) on the cost and charges to the public of providing health services by other persons));

    (((f))) (d) Until July 1, 1996, the special needs and circumstances of osteopathic hospitals, nonallopathic services, and children's hospitals;

    (((g))) (e) Improvements or innovations in ((the financing and)) delivery of health services ((which foster cost containment and serve to)) that promote quality assurance ((and cost-effectiveness));

    (((h) In the case of health services proposed to be provided,)) (f) The efficiency and appropriateness of the use of existing services and facilities similar to those proposed;

    (((i))) (g) In the case of existing services or facilities, the quality of care provided by such services or facilities in the past;

    (((j) In the case of hospital certificate of need applications, whether the hospital meets or exceeds the regional average level of charity care, as determined by the secretary;)) and

    (((k))) (h) In the case of nursing home applications:

    (i) The availability of other nursing home beds in the planning area to be served; and

    (ii) The availability of other services in the community to be served.  Data used to determine the availability of other services will include but not be limited to data provided by the department of social and health services.

    (3) A certificate of need application of a health maintenance organization or a health care facility which is controlled, directly or indirectly, by a health maintenance organization, shall be approved by the department if the department finds:

    (a) Approval of such application is required to meet the needs of the members of the health maintenance organization and of the new members which such organization can reasonably be expected to enroll; and

    (b) The health maintenance organization is unable to provide, through services or facilities which can reasonably be expected to be available to the organization, its health services in a reasonable and cost-effective manner which is consistent with the basic method of operation of the organization and which makes such services available on a long-term basis through physicians and other health professionals associated with it.

    A health care facility, or any part thereof, with respect to which a certificate of need was issued under this subsection may not be sold or leased and a controlling interest in such facility or in a lease of such facility may not be acquired unless the department issues a certificate of need approving the sale, acquisition, or lease.

    (4) ((Until the final expiration of the state health plan as provided under RCW 70.38.919, the decision of the department on a certificate of need application shall be consistent with the state health plan in effect, except in emergency circumstances which pose a threat to the public health.))  The department in making its final decision may issue a conditional certificate of need if it finds that the project is justified only under specific circumstances.  The conditions shall directly relate to the project being reviewed.  The conditions may be released if it can be substantiated that the conditions are no longer valid and the release of such conditions would be consistent with the purposes of this chapter.

    (5) Criteria adopted for review in accordance with subsection (2) of this section may vary according to the purpose for which the particular review is being conducted or the type of health service reviewed.

    (6) The department shall specify information to be required for certificate of need applications.  Within ((fifteen)) ten working days of receipt of the application, the department shall request additional information considered necessary to the application or start the review process.  Applicants may decline to submit requested information through written notice to the department, in which case review starts on the date of receipt of the notice.  Applications may be denied or limited because of failure to submit required and necessary information.

    (7) Concurrent review is for the purpose of comparative analysis and evaluation of competing or similar projects in order to determine which of the projects may best meet identified needs.  Categories of projects subject to concurrent review include at least new health care facilities, new services, and expansion of existing health care facilities.  The department shall specify time periods for the submission of applications for certificates of need subject to concurrent review, which shall not exceed ninety days.  Review of concurrent applications shall start ((fifteen)) ten working days after the conclusion of the time period for submission of applications subject to concurrent review.  Concurrent review periods shall be limited to one hundred fifty days, except as provided for in rules adopted by the department authorizing and limiting amendment during the course of the review, or for an unresolved pivotal issue declared by the department.

    (8) Review periods for certificate of need applications other than those subject to concurrent review shall be limited to ninety days.  Review periods may be extended up to thirty days if needed by a review agency, and for unresolved pivotal issues the department may extend up to an additional thirty days.  A review may be extended in any case if the applicant agrees to the extension.

    (9) The department or its designee, shall conduct a public hearing on a certificate of need application if requested, unless the review is expedited or subject to emergency review.  The department by rule shall specify the period of time within which a public hearing must be requested and requirements related to public notice of the hearing, procedures, recordkeeping and related matters.

    (10) Any applicant denied a certificate of need or whose certificate of need has been suspended or revoked has the right to an adjudicative proceeding.  The proceeding is governed by chapter 34.05 RCW, the Administrative Procedure Act.

    (11) ((An amended certificate of need shall be required for the following modifications of an approved project:

    (a) A new service requiring review under this chapter;

    (b) An expansion of a service subject to review beyond that originally approved;

    (c) An increase in bed capacity;

    (d) A significant reduction in the scope of a nursing home project without a commensurate reduction in the cost of the nursing home project, or a cost increase (as represented in bids on a nursing home construction project or final cost estimates acceptable to the person to whom the certificate of need was issued) if the total of such increases exceeds twelve percent or fifty thousand dollars, whichever is greater, over the maximum capital expenditure approved.  The review of reductions or cost increases shall be restricted to the continued conformance of the nursing home project with the review criteria pertaining to financial feasibility and cost containment.

    (12))) An application for a certificate of need for a nursing home capital expenditure which is determined by the department to be required to eliminate or prevent imminent safety hazards or correct violations of applicable licensure and accreditation standards shall be approved.

    (((13))) (12) In the case of an application for a certificate of need to replace existing nursing home beds, all criteria must be met on the same basis as an application for a certificate of need for a new nursing home, except that the need criteria shall be deemed met if the applicant is an existing licensee who proposes to replace existing beds that the licensee has operated for at least one year with the same or fewer number of beds in the same planning area.  When an entire nursing home ceases operation, its beds shall be treated as existing nursing home beds for purposes of replacement for eight years or until a certificate of need to replace them is issued, whichever occurs first.  However, the nursing home must give notice of its intent to retain the beds to the department of health no later than thirty days after the effective date of the facility's closure.

    Sec. 5.  RCW 70.38.125 and 1989 1st ex.s. c 9 s 606 are each amended to read as follows:

    (1) A certificate of need shall be valid for two years.  One six-month extension may be made if it can be substantiated that substantial and continuing progress toward commencement of the project has been made as defined by regulations to be adopted pursuant to this chapter.

    (2) A project for which a certificate of need has been issued shall be commenced during the validity period for the certificate of need.

    (3) The department shall monitor the approved projects to assure conformance with certificates of need that have been issued.  Rules and regulations adopted shall specify when changes in the project require reevaluation of the project.  The department may require applicants to submit periodic progress reports on approved projects or other information as may be necessary to effectuate its monitoring responsibilities.

    (4) The secretary, in the case of a new health facility, or the secretary of the department of social and health services, in the case of nursing homes, shall not issue any license unless and until a prior certificate of need shall have been issued by the department for the offering or development of such new health facility.

    (5) Any person who engages in any undertaking which requires certificate of need review without first having received from the department either a certificate of need or an exception granted in accordance with this chapter shall be liable to the state in an amount not to exceed one hundred dollars a day for each day of such unauthorized offering or development.  Such amounts of money shall be recoverable in an action brought by the attorney general on behalf of the state in the superior court of any county in which the unauthorized undertaking occurred.  Any amounts of money so recovered by the attorney general shall be deposited in the state general fund.

    (6) The department may bring any action to enjoin a violation or the threatened violation of the provisions of this chapter or any rules and regulations adopted pursuant to this chapter, or may bring any legal proceeding authorized by law, including but not limited to the special proceedings authorized in Title 7 RCW, in the superior court in the county in which such violation occurs or is about to occur, or in the superior court of Thurston county.

    Sec. 6.  RCW 70.38.135 and 1989 1st ex.s. c 9 s 607 are each amended to read as follows:

    The secretary shall have authority to:

    (1) ((Provide when needed)) Contract for temporary or intermittent services of experts or consultants or organizations ((thereof, by contract, when such services are to be performed on a part time or fee-for-service basis));

    (2) Make or cause to be made such on-site surveys of health care or medical facilities as may be necessary for the administration of the certificate of need program;

    (3) ((Upon review of recommendations, if any, from the board of health:

    (a))) Promulgate rules under which health care ((facilities)) providers doing business within the state shall submit to the department such data ((related to health and health care)) as the department finds necessary to the performance of its functions under this chapter;

    (((b))) (4) Promulgate rules pertaining to the maintenance and operation of medical facilities which receive federal assistance under the provisions of Title XVI;

    (((c))) (5) Promulgate rules in implementation of the provisions of this chapter, including the establishment of procedures for public hearings for predecisions and post-decisions on applications for certificate of need; and

    (((d))) (6) Promulgate rules providing circumstances and procedures of expedited certificate of need review if there has not been a significant change in existing health facilities of the same type or in the need for such health facilities and services((;

    (4) Grant allocated state funds to qualified entities, as defined by the department, to fund not more than seventy-five percent of the costs of regional planning activities, excluding costs related to review of applications for certificates of need, provided for in this chapter or approved by the department; and

    (5) Contract with and provide reasonable reimbursement for qualified entities to assist in determinations of certificates of need)).

NEW SECTION. Sec. 7.  RCW 70.38.155, 70.38.156, 70.38.157, 70.38.914, 70.38.915, 70.38.916, 70.38.917, 70.38.918, and 70.38.919 are each decodified.

NEW SECTION. Sec. 8.  RCW 70.38.095 and 1979 ex.s. c 161 s 9 are each repealed.

NEW SECTION. Sec. 9.  The following acts or parts of acts are each repealed, effective July 1, 1997:

(1) RCW 70.38.105 and 1995 c . . . s 3 (section 3 of this act), 1992 c 27 s 1, 1991 sp.s. c 8 s 4, 1989 1st ex.s. c 9 s 603, 1984 c 288 s 21, 1983 c 235 s 7, 1982 c 119 s 2, 1980 c 139 7, & 1979 ex.s. c 161 s 10;

(2) RCW 70.38.111 and 1993 c 508 s 5, 1992 c 27 s 2, 1991 c 158 s 2, 1989 1st ex.s. c 9 s 604, 1982 c 119 s 3, & 1980 c 139 s 9;

(3) RCW 70.38.115 and 1995 c ... s 4 (section 4 of this act) & 1993 c 508 s 6;

(4) RCW 70.38.125 and 1995 c . . . s 5 (section 5 of this act), 1989 1st ex.s. c 9 s 606, 1983 c 235 s 9, 1980 c 139 s 10, & 1979 ex.s. c 161 s 12; and

(5) RCW 70.38.220 and 1991 c 271 s 1.

NEW SECTION. Sec. 10.  The department shall, by December 1, 1995, provide recommendations to the legislature on what, if any, system needs to be maintained by the state to assess quality and access issues of health services and facilities.  Consideration should be given to the policy statement as outlined in RCW 70.38.015, as well as the potential impact of health reform on quality and access to services and facilities.

NEW SECTION. Sec. 11.  (1) The enactment of this act shall not have the effect of terminating, or in any way modifying, the validity of any certificate of need that shall already have been issued before July 1, 1995.

    (2) Any certificate of need application that was submitted and declared complete, but upon which final action had not been taken before July 1, 1995, shall be renewed and action taken based on chapter 70.38 RCW as in effect before July 1, 1995.

NEW SECTION. Sec. 12.  If any part of this act is found to be in conflict with federal requirements that are a prescribed condition to the allocation of federal funds to the state, the conflicting part of this act is inoperative solely to the extent of the conflict and with respect to the agencies directly affected, and this finding does not affect the operation of the remainder of this act in its application to the agencies concerned.  The rules under this act shall meet federal requirements that are a necessary condition to the receipt of federal funds by the state.

NEW SECTION. Sec. 13.  If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION. Sec. 14.  This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and shall take effect July 1, 1995.

                            --- END ---